Joshua20Sheats20Podcast

00:00:00.000 | Welcome to Martinis and Your Money, the podcast about living a better life one cocktail at

00:00:11.400 | a time. I'm your host, Shanna McLeigh. I'm so excited you're joining us today. We're

00:00:15.760 | going to have a lot of fun, so let's get started.

00:00:25.360 | Hello Martinis and Your Money listeners. In case you didn't know, September is Life Insurance

00:00:30.440 | Awareness Month, and as a financial planner, life insurance is near and dear to my heart,

00:00:35.840 | not only for my family's financial health, but also the financial health of my clients'

00:00:40.040 | families. So I'm excited to tell you that today's episode is being brought to you by

00:00:44.360 | my friends at TermLifeInsurance.com. TermLifeInsurance.com provides affordable life insurance for your

00:00:51.000 | family, so please check them out at www.termlifeinsurance.com or through my site financially-blonde.com/termlife.

00:01:02.440 | Today I'm talking to Joshua Sheets, founder of the website and podcast Radical Personal

00:01:07.360 | Finance about life insurance. I've talked about this topic on the podcast in the past

00:01:12.200 | and I wanted to go into greater depth with Joshua and speak more to the choices between

00:01:17.000 | whole life and term life and when life insurance makes sense as an investment. Josh's years

00:01:22.480 | of training and education in life insurance were clear in our conversation, and I think

00:01:26.840 | this is a valuable conversation for anyone who doesn't feel comfortable with their life

00:01:31.040 | insurance knowledge. And now here's Joshua Sheets.

00:01:40.440 | Welcome to the show, Josh.

00:01:42.120 | I'm glad to be here.

00:01:43.120 | I'm so glad to have you. It's been a year since we were sitting next to each other at

00:01:48.560 | FinCon when I was just starting to think about podcasting, and I'm excited to now have you

00:01:53.600 | on my podcast.

00:01:54.600 | I'm glad that you're doing it. We need lots and lots more people to build new financial

00:02:00.520 | blogs, new financial podcasts, and to diversify the sources of information. So I'm glad that

00:02:07.000 | you're doing it. I'd love to see thousands more people step into this ring as well.

00:02:11.720 | I totally agree. The more the merrier, right? Everybody's always like, "Oh, is it too saturated?"

00:02:15.880 | I feel like it's never saturated. Everybody's got a unique voice and perspective.

00:02:19.520 | Right. There are different people who will come from different perspectives, and all

00:02:24.200 | of us are going to relate more with a certain background. So I've got a certain background

00:02:29.680 | and a way of expressing thoughts that is perfect for some people, and there are some people

00:02:35.400 | who cannot stand the low IT things. And I look at some financial shows out there and

00:02:41.240 | say, "I would never in my life listen to that show." But yet I know they have a real

00:02:44.960 | audience. And so I love the fact that we've eliminated the barrier between somebody who

00:02:49.880 | is an expert or a content creator and the individual listening. And so we need more

00:02:56.000 | and more competition. I'm a big free market guy, and I love the competition.

00:02:59.160 | I love it. And you used to be a financial advisor like me, and we used to say in the

00:03:04.040 | industry, "There's a client for every advisor. There's someone for everyone." And my listeners

00:03:10.480 | are probably all people who love to drink, since I do.

00:03:14.560 | That works.

00:03:15.560 | And I'm bringing you into the fold today. So what are you drinking with me today?

00:03:20.880 | I have got a beautiful, let's see, it's a blue hefty cup here filled with crystal clear,

00:03:28.160 | perfect water.

00:03:29.160 | Wow. Is it Florida's finest?

00:03:31.440 | It is tap water run through my filtration system. I should have been better prepared

00:03:35.840 | and made myself a nice white Russian or something, but I didn't.

00:03:38.920 | Wait, so is a white Russian your go-to drink if you were to have a cocktail?

00:03:44.640 | It is. And the story behind that, I'm not much of a drinker, but one time I had a sales

00:03:50.320 | job when I was in college, and I really have never been a drinker. But at this job, part

00:03:57.320 | of my job description was to go to cocktail parties and do the how are you's and who are

00:04:01.000 | you's with some people who were there. And so I needed to have a drink in my hand, and

00:04:05.160 | I never ordered a drink in my life. And so I walked up to the bar to order a drink, and

00:04:09.040 | I didn't know what to order. So the guy beside me ordered a white Russian. And I was like,

00:04:13.000 | I'll have a white Russian. So I got one and I tasted it. I said, wow, this is delicious.

00:04:19.240 | And to this day, I don't know how many years later that still, if I'm going to order a

00:04:22.560 | drink, it's often going to be a white Russian or a glass of red wine.

00:04:27.400 | That's hysterical. That's like how I got into Malibu Bay Breezes. That was my first underage

00:04:33.800 | drinking experience. I was like, oh yeah. Somebody's like, oh, just drink a Bay Breeze.

00:04:37.880 | It doesn't taste like liquor at all. It's funny how much of drinking is all about the

00:04:42.720 | image and the status. And there I was. I didn't have a clue. Like, what are the names of drinks?

00:04:47.880 | I don't know. And the white Russian is such a peculiar drink, too. I mean, it's delicious.

00:04:56.560 | It's like dessert in a drink. That's funny. I love it. Well, I'm drinking my go-to. Well,

00:05:03.120 | I've got a lot of go-to's. This one is just a vodka tonic. I'm a big vodka fan. I'm a

00:05:08.480 | clear liquor fan. A long story that I don't think I've yet shared on the podcast. One

00:05:13.320 | day I will share it of why I only drink. I say it's the only way I'm prejudiced is in

00:05:19.520 | my alcohol. I only drink the clear stuff. So the brown stuff's got me in trouble in

00:05:24.600 | the past. I believe it. So, well, I'm excited to have you on because this show is airing

00:05:30.640 | in September. And September is Life Insurance Month, which is a very exciting topic to the

00:05:38.120 | two of us who are financial planners and know the importance of it, but probably not really

00:05:43.240 | exciting to the general population. I love the topic. Even if you're not excited, I'm

00:05:49.160 | pretty passionate about life insurance. So I'll do my best to make it interesting. I

00:05:52.840 | need you to bring your egg in because you used to work for Northwestern Mutual. Yeah,

00:05:57.480 | I spent six years as a financial advisor with Northwestern Mutual. And I probably, as an

00:06:03.200 | introduction to the topic of life insurance, I probably should give a quick background

00:06:07.120 | on my history in the industry.

00:06:09.080 | Please do. I'd love it.

00:06:10.920 | Because life insurance is one of the most emotionally charged issues. And people often

00:06:17.360 | have very strong opinions and perspectives on it, specifically with regard to what type

00:06:22.520 | of life insurance you should buy. There's a lot of reasons for it, but people have strong

00:06:28.720 | opinions. And what's interesting is, as a young man, I was always a buy term and invest

00:06:34.560 | the difference guy, which is one of the most strongly held perspectives. And I couldn't

00:06:38.920 | conceive of why anybody would think anything else other than that because I was profoundly

00:06:43.360 | convinced that the only type of life insurance you ever bought was term life insurance and

00:06:47.880 | everything else was a total waste of money and a total rip off. And then I met people

00:06:51.680 | who were on exactly the opposite side who would say, "Why would anybody buy term insurance?"

00:06:55.880 | I couldn't believe it.

00:06:57.880 | There are strong opinions.

00:07:02.000 | Very strong. And so I was always a personal finance junkie. From my early teens, I was

00:07:08.920 | the nerd who probably when I should have been out playing football, I was reading books

00:07:11.680 | on personal finance. So at that time, I primarily consumed mainstream personal finance books,

00:07:18.000 | something like David Box, The Automatic Millionaire or Millionaire Next Door, Think Thomas Stanley,

00:07:23.040 | things like that, just mainstream perspectives. And that served me well up until I was in

00:07:29.160 | college. And in my middle years of college, I had kind of an up and down financial life

00:07:34.960 | in my own personal finances. But in my middle years of college, I got turned on to The Dave

00:07:39.640 | Ramsey Show by my brother who gave me a copy of the book Total Money Makeover. And that

00:07:44.760 | book really inspired me to get out of debt. And it also shaped a lot of my own personal

00:07:50.600 | financial philosophy because at that time when I was working to pay off my debt, I was

00:07:54.160 | listening to Dave Ramsey every day for about the podcast of his three-hour show. And I

00:07:58.920 | just consumed thousands of hours of his content. Yeah, thousands wouldn't be an exaggeration.

00:08:03.000 | I would say thousands of hours. And so I was very strongly, with regard to life insurance,

00:08:08.160 | I was very strongly persuaded of his perspective which is always buy term life insurance.

00:08:14.440 | After college, I worked for a little while in the corporate world and I knew that I didn't

00:08:19.240 | want to work in the corporate space anymore. I wanted to run my own business and I got

00:08:23.720 | laid off from a job. And when I was deciding what my next move was, I decided to go into

00:08:28.640 | the financial services business. And I was recruited by a few different companies and

00:08:32.800 | the company that I chose to join was a company called Northwestern Mutual. Now, Northwestern

00:08:37.160 | is one of the leaders in the life insurance business. That's their heritage, is as a life

00:08:41.700 | insurance company. And ever since 1999 with the Financial Services Modernization Act,

00:08:46.480 | all basically prior to 1999, if you were an insurance company, you did insurance. If you

00:08:53.480 | were an investment company, you did investments. And if you were a bank, you did banking. Well

00:08:56.800 | now since that time, everything's all mixed up. So your insurance agent sells you investments

00:09:01.600 | and refers you to their banker. You buy life insurance in the lobby of your bank and everything's

00:09:06.020 | all mixed up.

00:09:07.020 | The one-stop shop now.

00:09:08.520 | Exactly. But the heritage of Northwestern Mutual was as a life insurance company and

00:09:12.340 | they are known as one of the largest providers of whole life insurance. And I knew that going

00:09:19.120 | in based upon my company research. So I interviewed with four different recruiters and advisors

00:09:25.300 | as part of my interview process. And the question that I had for all of them was I said, "I

00:09:30.900 | don't believe that I could ethically sell whole life insurance because I don't 'believe'

00:09:35.540 | in the product." It's almost like it's a religious conviction. I don't believe in it. And I said,

00:09:39.580 | "Tell me why I'm wrong." And here I was sitting with some very smart, very experienced people.

00:09:43.900 | Some would say very biased, but I'd say smart and experienced. And all of them shared with

00:09:48.300 | me thoughts and ideas and perspectives that I never knew.

00:09:51.220 | Concurrently, I was actually interviewing with other companies including Primerica,

00:09:55.980 | which is the exact opposite. They're almost arch enemies, Northwestern Mutual and Primerica

00:10:00.620 | because Primerica only sells term life insurance and Northwestern Mutual, their main flagship

00:10:05.620 | product is whole life insurance. So I had a very interesting exposure to the industry.

00:10:10.980 | So I did a lot of research about insurance products to try to understand what was I missing.

00:10:18.460 | And then I went on to build a career. I decided that I learned enough about whole life insurance

00:10:23.980 | to be satisfied that it wasn't an ethically wrong product. It wasn't like it was a terrible

00:10:28.740 | product and I can share some of the reasons why. But it did need to be rightly used.

00:10:32.340 | So I built a business with Northwestern Mutual for the first few years focusing primarily

00:10:37.540 | on insurance sales, life insurance, disability insurance and long term care insurance. Then

00:10:41.540 | after a few years, when I started I was a young and green 23 year old newbie. And then

00:10:46.060 | I spent a lot of time studying and a lot of time working hard and learning my craft. And

00:10:50.060 | then I transitioned to more of a wealth management practice for another three to four years.

00:10:55.900 | So I spent a total of six years there. And at that point in time, I closed my practice

00:10:59.400 | to launch Radical Personal Finance. And that's what I've been doing for the last year and

00:11:01.880 | a half now.

00:11:02.880 | And you just gave my listeners exactly why I have you on for this conversation. So I'm

00:11:08.860 | even more excited. I knew this about your background and I appreciate you sharing it.

00:11:14.380 | I've talked about life insurance on the podcast in the past and just life insurance in general

00:11:20.100 | because step one is thinking about life insurance, I think. And then I really wanted to do this

00:11:26.900 | next level, dive deeper because I see this all the time with my clients. Some of them

00:11:33.980 | don't even know they should have life insurance or don't understand the importance of it.

00:11:36.940 | So that was the first podcast was let's address life insurance. And now this is step two is

00:11:42.220 | like, okay, what type of life insurance is right for me? And I think, and there's all,

00:11:48.340 | like we said, there's opinions on either side. And I think it gets very confusing for some

00:11:52.540 | people. And we both know that there are persuasive arguments on both sides, rightly, wrongly,

00:11:59.100 | and it gets people confused. And I really wanted to have kind of more of an in-depth

00:12:02.540 | conversation about life insurance to help people really understand why term, why whole

00:12:09.060 | life, when does it make sense and kind of how to understand the difference, the differences

00:12:15.900 | and the nuances. So I, so the first question I really have for you is why do you think

00:12:22.980 | whole life gets such a bad rap?

00:12:25.580 | A bunch of reasons. And number one, whole life insurance gets a bad rap because all

00:12:32.580 | life insurance agents are paid on commission and commissions are calculated based upon

00:12:38.140 | a percentage of what in the business we call the first year premium. So these premium rates

00:12:44.140 | vary across companies and across types of policies, but they'll range from anywhere

00:12:50.260 | from 50% of the first year premium to a hundred and, to over a hundred percent of the first

00:12:55.060 | year premium, depending on the product. So let's just, for sake of analysis, let's just

00:12:59.620 | say 50% makes our math simpler. If you're selling a term life insurance policy that's

00:13:05.180 | $30 a month, then your first year premium is $360. So a 50% commission rate would be

00:13:10.700 | about $175 ish. That's not bad money, but if you can take the same insurance product

00:13:17.820 | and you can change the commissions from $30 a month to $300 a month, well now you've

00:13:23.780 | just increased your commission rate to a much higher number. And I hate to do on air math

00:13:27.660 | because I always get the number wrong, but let's just say it's, I mean, you're in

00:13:31.940 | $1,750 if I'm, if I'm anywhere close on my mental math. And so there's a very large

00:13:37.140 | incentive for insurance agents to change from the $30 a month policy to the $300 a month

00:13:44.460 | policy because of the incentive for higher commissions. And unfortunately money talks

00:13:51.540 | and there have been many, many life insurance agents who have made the choice to press the

00:13:57.540 | product that's the higher commission product than just simply because of the fact of it

00:14:03.060 | being a commission. Now that's the first thing you got to get out there and you got

00:14:07.580 | to be aware of that. After being in the industry, I personally think there are fewer agents

00:14:13.700 | who've made that decision than I thought before being in the industry because most

00:14:16.460 | agents that I know usually they're really working hard to do what's in their client's

00:14:21.500 | best interests. But there is a very large potential conflict of interest there.

00:14:26.220 | The second thing that's happened is due to the nature of the industry being somewhat

00:14:32.300 | siloed in the past, oftentimes the only tool that a life insurance agent had to help their

00:14:38.580 | clients with investments was a life insurance policy or an annuity. And so what happened

00:14:44.780 | is you would generally either be a stockbroker, in which case you didn't sell life insurance,

00:14:51.220 | or you were an insurance agent, in which case you didn't sell stocks. So there's a natural

00:14:55.040 | lifestyle with life insurance needs that in most, and I'm going to use as my proxy client,

00:15:02.100 | I'm going to use a middle income, dual income household, middle class situation because

00:15:07.900 | planning for somebody who is in the lower economic sphere, minimum wage worker, is very

00:15:12.860 | different than planning for somebody who's a billionaire. And I'll talk about some of

00:15:15.580 | the strategies, but let's just stick with a middle income household.

00:15:19.500 | There's a phase of need. And so let's say that you have a two income household, young

00:15:24.220 | families coming together. There's a need at that age for a lot of insurance because their

00:15:28.580 | need in case one of them dies is very large and they don't have a lot of money to invest.

00:15:33.000 | But through the course of a career, they're going to pile up money, they're going to want

00:15:35.980 | to invest, and the need for insurance is going to decline. And so that becomes a real business

00:15:39.820 | problem for a life insurance agent. If they can't also do investments, then they have

00:15:43.940 | to say, "Well, how do I keep my client with their insurance policies for longer and how

00:15:48.220 | do I give them something to invest?" And so what happened is insurance agents would start

00:15:52.540 | to compete against stockbrokers. And this is usually the comparison that you hear in

00:15:56.640 | today's world where people talk about, "Well, you either buy stocks or you buy whole life

00:16:01.200 | insurance." That's often the comparison that's made. And I think that's an unfortunate artifact

00:16:06.260 | of that siloization of the industry. I think the best model personally, from my opinion,

00:16:12.500 | is for a good financial advisor to have access to both life insurance products and investment

00:16:18.300 | products and then to fit those products to their client situation. But there's some powerful

00:16:22.900 | conflicts of interest. And then the other thing is when you get into companies, all

00:16:28.220 | financial companies in many ways are suspect. Many insurance companies have just done some

00:16:32.580 | egregious things with their products and with their policies, just like many financial companies

00:16:37.820 | have done some egregious things to their products and to their policies. And the financial industry

00:16:42.840 | does not have a history of transparency. They don't have a history of low costs. So those

00:16:48.860 | things are changing very much because there's now a lot more transparency and that's forced

00:16:53.500 | the costs down. And this is across the board on insurance policies and on investment products.

00:16:58.700 | There's been massive presses by the free market to expose certain things and that's caused

00:17:04.060 | the companies to change their product design. But there are a number of reasons why and

00:17:08.940 | there's some very important conflicts of interest that consumers need to be aware of so that

00:17:12.740 | they can move properly through the industry.

00:17:16.460 | And I think you bring up great points, Josh, too, because the there are reasons why whole

00:17:23.500 | life gets a bad rap. And and for full disclosure, these things still happen, you know, even

00:17:28.740 | though because I you know, I've got clients who who specifically have these situations

00:17:34.980 | where they met with a financial planner at you know, and the financial planner title

00:17:39.940 | we both know can be thrown on just about anything. Anybody could call themselves that. And and

00:17:45.780 | then and people clients have this perspective of what they're going to get and they don't

00:17:49.740 | always get that. And they think, OK, well, I'm talking to a financial planner and they

00:17:52.980 | say they're a holistic financial planner and they give this great presentation. But at

00:17:58.700 | the end of the day, it ends up being one thing. And in particular, I this is why I really

00:18:05.940 | want to talk to you, too. I recently had a client who was working at the financial planner

00:18:09.540 | before me, and he was actually at Northwestern Mutual, and she wanted to invest and, you

00:18:16.540 | know, do a number of different things. And her, you know, quote, investment product is

00:18:21.340 | a whole life policy. And she's 30 something years old with no kids and not married and

00:18:29.340 | no property and anything like that. And from my perspective, I thought, wow, like, how

00:18:36.780 | did this make sense? You know, and I wanted to pick your brain. Like, what would you think

00:18:42.900 | about this? This seeing this from somebody else's portfolio? In my mind, it just screamed,

00:18:50.260 | you know, again, conflict of interest. And I know you don't know the full story, but

00:18:54.740 | what are your thoughts on if you see something like that? And what are your thoughts on how

00:18:58.380 | does how does a client like her how does she how does she even know she got the run? It's

00:19:04.300 | like, how do you even decipher? You think you're speaking to a professional financial

00:19:09.460 | planner and you just trust them? And how do you know? How do you kind of read between

00:19:15.140 | the lines?

00:19:16.140 | I really that's the most difficult question that I get. And it's the reason why I created

00:19:20.820 | Radical Personal Finance. It's very hard for most consumers to know whether they're getting

00:19:25.400 | good advice or bad advice. Yeah, it's very difficult. And one of the things that I'm

00:19:30.020 | trying to do with with my show is to bring more light to some of the things that often

00:19:37.740 | aren't talked about. There's no way I don't believe there's any way that you or I can

00:19:42.460 | sit here and you may know more facts, but with just the facts that you described, it's

00:19:47.540 | very hard for me to know, okay, was this person given good advice or bad advice? I've been

00:19:53.740 | in situations where on a case like that, it's a natural fit. And it could be a natural fit,

00:19:59.980 | for a number of reasons. If the person, for example, has a natural or an inherent distrust

00:20:05.220 | of investing in stocks. On the surface of it, you would generally say younger person,

00:20:10.220 | little need for insurance, 30 year old, not single, you would say not so much of a need

00:20:14.420 | for death benefit. That's a mark against life insurance. You would also say long time horizon,

00:20:19.580 | assuming that they're investing for retirement. So you want as you want, you've got a long

00:20:24.340 | time horizon. So you should you should be investing in a way that's going to have the

00:20:27.820 | highest maximum possible return over long period. You would usually steer away in that

00:20:33.500 | situation from whole life insurance and you would steer towards a much more aggressive

00:20:38.620 | stock based portfolio. But I've also been in that situation where a client just flat

00:20:42.540 | out categorically says, I cannot stomach the thought of losing money and I cannot stomach

00:20:48.540 | the volatility of the stock market. That's very difficult because for financial advisors,

00:20:53.540 | oftentimes you as an advisor are very comfortable with volatility, but many people are actually

00:20:59.140 | not comfortable. And a hobby of mine is actually to look at what are the actual returns that

00:21:03.700 | people actually get in their investments. And when I was trying to figure out how do

00:21:07.580 | I become a skillful and useful investment portfolio manager, I went back and looked

00:21:13.380 | at what are the actual returns that people get. And in general, when you pull the data,

00:21:19.420 | you find that the average investor underperforms their own investments by greater than 50%.

00:21:25.180 | So there are a number of false comparisons that are often made by those of us who are

00:21:28.940 | pundits on the industry where we say, well, the S&P 500, if you put your money into an

00:21:33.660 | S&P 500 index fund and left it alone, you would get a 10% rate of return over XYZ historical

00:21:42.460 | period. But when you look at the actual average investor, you find they've underperformed

00:21:46.780 | that return by greater than 50%. And one reason for that can be volatility. And so if that

00:21:53.500 | person talked through with their advisor and their advisor said, here are your options.

00:21:57.860 | You could choose mutual funds and here's what we would guess with the mutual funds,

00:22:03.460 | here's the volatility that we would expect. You need to be prepared in any year for the

00:22:09.180 | value of your portfolio to decline by about 15%. Every three years, you need to be prepared

00:22:13.500 | for the value of your portfolio to decline by about 33%. And over the course of your

00:22:17.740 | investment lifetime, Miss 30-year-old, you need to be prepared for on at least two to

00:22:22.180 | three occasions for the value of your portfolio to decline by about 50%. Those are the realities

00:22:27.800 | of investing in the stock market. And so you've got $100,000 here in this investment account.

00:22:32.580 | That means that it's very likely that you're going to open your account statements within

00:22:35.900 | the next three years and your account's going to be down to about $60,000. Are you okay

00:22:40.020 | with that? If they're okay with that, I would encourage them to be in stocks. And my job

00:22:45.540 | as a good investment advisor is to move them into stocks. Now on the flip side, if I turned

00:22:50.100 | them and they said, no, I can't handle that. I cannot do that at all. You'd have to go

00:22:54.140 | through over tax ramifications as well, which is a whole separate thing that I can share.

00:22:58.380 | Then you might look at something like a life insurance policy and you might say, this policy

00:23:02.140 | is guaranteed to grow in value. Here is what we, here's historically how this policy is

00:23:07.540 | performed. Looking forward, I would guess that it would work about like this. You may

00:23:11.740 | get a rate of return that's about, depending on the policy, depending on the policy design,

00:23:16.980 | 4 or 5%, 6% maybe, depending on how you've structured it. What would you prefer? And

00:23:22.500 | that person may have chosen to be preferred. Now I've just sketched that out as an ideal.

00:23:26.380 | They may have said, okay, let's do the life insurance policy. I've sketched that out as

00:23:29.580 | an ideal scenario. And my guess is that neither of those things happened as far as most advisors

00:23:34.340 | are not good enough to go through all the scenarios. But that would be what I would

00:23:38.060 | love to see every advisor do. Because the problem that I see, the mistake that I see

00:23:42.260 | people making is they don't clearly articulate what their goals are. Then they don't clearly

00:23:46.800 | understand the risks and the benefits. And I'm not just talking about what's the standard

00:23:51.340 | deviation of my investment portfolio. What are the risks and the benefits of any approach

00:23:55.620 | to investing? And then how do I make an intelligent decision within those choices? So I don't

00:24:01.940 | like the comparison of stocks versus life insurance. I own both. And I think both have

00:24:06.740 | a place. But they've got to have a right place in the right situation at the right time.

00:24:12.100 | I don't like to see either of them vilified.

00:24:15.140 | I agree. I think they both have a place. And I want to talk more about where you think,

00:24:20.540 | what your opinion is on term life versus whole life. And we kind of went through a little

00:24:25.140 | bit on life insurance as an investment. But I think they both have a place. And I think

00:24:28.980 | that the kind of comfort that the listeners and general public should have is that there

00:24:34.180 | is a place for these things. It's just a matter of, it really comes back to the investor and

00:24:40.780 | the client of being more clear and concise on what they need. And I think, like you said,

00:24:46.900 | sometimes they just don't. I've had clients who are like, I hate to see my portfolio go

00:24:52.620 | up and down. I hate it. I hate it. I hate it. I hate it. And so what they're saying

00:24:57.940 | to me is I want a conservative portfolio. So one in particular cracks me up. She cracks

00:25:03.660 | me up. So she was in mostly fixed income. And she's an older client too, but she was

00:25:09.700 | mostly fixed income. And then we meet for her quarterly review. She's like, why isn't

00:25:13.660 | my portfolio going anywhere? And I said, well, remember how you said you didn't like the

00:25:22.100 | up and down? OK, well, maybe I need a little more risk. I said, OK. So then we add on more

00:25:28.460 | risk. And then she's like, wow, my portfolio just kind of seems all over the place. Fast

00:25:34.020 | forward to the next quarterly meeting. I'm like, well, remember? And it's funny because

00:25:38.500 | I think clients will say things and mean something else. Sometimes they're not even totally sure

00:25:45.780 | how they feel in theory. And I think a lot of what I do and spend time with them is helping

00:25:51.140 | them understand what's going on. I think the best way to get really comfortable with what's

00:25:55.100 | happening in your portfolio is to be educated. And hopefully you're working with a financial

00:25:59.580 | advisor or financial planner who is getting you comfortable with that and understanding,

00:26:03.740 | like you were saying, a $100,000 portfolio could be $60,000. But then it could also equally

00:26:09.520 | be $120,000. And understanding that kind of big swing. And as long as they understand

00:26:16.660 | that those are the outcomes, then getting them comfortable with the outcomes, then I

00:26:22.140 | feel like they have a better grip on what they're doing.

00:26:24.980 | But I wanted to ask you about term versus whole life. So this is the big kind of crux

00:26:33.140 | of it, right? Let's just say somebody goes to talk to their financial planner, whatever

00:26:39.460 | firm they work at, and says, I need life insurance. And what kind should I get? When do you think

00:26:46.540 | that it makes sense for somebody to have whole life? And when do you think it makes sense

00:26:51.220 | for term life?

00:26:52.580 | If the need for insurance is temporary, you always buy term life insurance. If the need

00:26:57.380 | for insurance is permanent, you buy whole life insurance. It's that simple. There's

00:27:02.140 | really no need to, I mean, there are varieties to it, but that's what you need to recognize.

00:27:08.700 | All temporary life insurance needs should be met with term. All permanent life insurance

00:27:12.400 | needs to be met with whole life insurance.

00:27:14.460 | And what do you think is a permanent need for life insurance? Who's somebody who has

00:27:19.420 | a permanent need for life insurance?

00:27:21.860 | I think most people have a permanent need for life insurance, but there are some people

00:27:25.780 | who have more of a need than not. Tying together that question and also the previous commentary

00:27:31.900 | that you provided, one thing in my experience that really changed me, and I was fortunate

00:27:38.380 | because I worked with Northwestern Mutual, I had the opportunity to work with people

00:27:41.460 | who had been long term clients of the company. They call this just managing the company's

00:27:47.140 | clients.

00:27:48.140 | And so as part of that, when I started as a financial advisor, I was 23 years old, and

00:27:52.020 | so naturally the natural market that I had was young people. And so I had my philosophies

00:27:57.620 | about the best way to handle money as a 23 year old or a 24 year old or a 25 year old.

00:28:02.380 | And then I had the academic framework from becoming a certified financial planner or

00:28:06.620 | working through the chartered life underwriter curriculum, had the academic framework.

00:28:11.120 | But when actually speaking with people who were older, and I had several clients who

00:28:14.860 | were in their 70s, 80s and 80s, I would discover things like a client would say, and this is

00:28:20.700 | with regard to the topic of whole life insurance, they would say, "The best financial decision

00:28:24.860 | I ever made was to buy a whole life insurance policy." And I would say, "Huh? That shouldn't

00:28:30.620 | be the case."

00:28:31.620 | Well, what happened is that they looked back and that actually had been their best investment,

00:28:35.820 | even though the academic would say, "Well, it shouldn't be," but it actually was for

00:28:41.000 | them in reality.

00:28:42.540 | So the other thing I didn't understand was I had always bought into the concept of self-insuring.

00:28:47.880 | I'd always understood that if I would buy term insurance and I would invest the difference

00:28:52.960 | into stocks, and so therefore because of doing that over the course of about a 20 to 30 year

00:28:57.940 | time perspective, then I would get into a situation where I would have plenty of money

00:29:02.520 | and I would no longer need life insurance. I would be self-insured. That was the concept

00:29:06.280 | that I began with.

00:29:08.360 | I had an experience that really, really changed that, however. The experience was with a client,

00:29:13.880 | and this was a network client, somebody who'd had policies with the company for a very long

00:29:18.720 | time and I took over servicing their account. They were in their mid-70s. They had been

00:29:23.240 | very successful. The husband had been an entrepreneur, had sold a company for several million dollars.

00:29:29.860 | They had invested the majority of that money and they'd split it between him and his wife

00:29:35.680 | in some different trust accounts. When I met them, they had a net worth of about $2 million

00:29:40.560 | and they were living within their income, but it was starting to get tight. The reason

00:29:43.520 | it was getting tight was because the majority of their money was tied up in houses. They

00:29:48.080 | had a $600,000 house in Massachusetts and about a $450,000 house here in Florida. He

00:29:54.120 | had exhausted his investment accounts. His wife still had her investment accounts and

00:29:58.120 | trust, but because of their age, those were primarily tilted in the direction of fixed

00:30:02.840 | income and they weren't creating a ton of income at that time. This was about three

00:30:07.480 | years ago.

00:30:09.080 | She died unexpectedly. She was there at the first meeting. I met with them a couple of

00:30:13.160 | times. I was working through a comprehensive plan for them. Then all of a sudden, he called

00:30:16.600 | me and said, "My wife's in the hospital. She contracted this very strange disease and

00:30:20.360 | she died over the course of a couple of weeks." Here he was with a net worth of $2 million

00:30:26.480 | and he didn't have $5,000 or $10,000 in his checking account. He couldn't pay for

00:30:29.560 | the funeral. He had to put the funeral on to a credit card. I delivered a death benefit

00:30:36.920 | check of about $60,000 or $70,000 of the death benefit on her permanent life insurance policies

00:30:43.120 | that she'd had. He was so grateful to have that money because it got him through the

00:30:48.260 | period of months, allowed him to pay for the funeral and allowed him to wait until the

00:30:51.720 | house was sold, etc., before he was able to get through. That really surprised me because

00:30:57.000 | in general you would say, "Here's somebody who has $2 million of assets and no debt and

00:31:03.280 | you're telling me that they need this life insurance money." But it was a real blessing

00:31:07.060 | to them to have the life insurance money.

00:31:11.520 | That caused me to filter my academic approach, which was, "Well, they should have just

00:31:16.760 | had a bigger emergency fund." Yeah, but people spend their emergency funds. It caused

00:31:21.400 | me to say, "Well, they should have maintained more liquidity. They shouldn't have had

00:31:23.880 | those two houses." But when people are involved in their houses and they've got

00:31:27.320 | their lifestyles and their country club memberships and everything set, they don't often change.

00:31:31.720 | It really caused me to become a little bit less convinced of my academic perfection and

00:31:37.360 | a little bit more connected with real life. I think that most people would like to have

00:31:42.040 | some life insurance that continues forever.

00:31:45.320 | The other experience that I had working with clients, and I'll often refer to clients

00:31:50.240 | because that's what changed me. I had my theories and then I met real life. The other

00:31:56.160 | experience that I had was I found that almost nobody ever ran out of their need for life

00:32:01.360 | insurance because instead of my approach, which was, "Well, you buy a house and then

00:32:05.800 | you pay it off and then you just get really rich." Most people buy a house, they pay

00:32:09.600 | it down, then they upgrade their house, then they buy cars, and then they put their kids

00:32:12.800 | in college.

00:32:13.800 | What happens is that most 50-year-olds are not measurably of a better financial situation.

00:32:19.720 | They don't actually need less insurance than they did when they were in their 30s.

00:32:23.800 | They actually need more often because they've increased their incomes, they've increased

00:32:27.000 | their lifestyles, and now they need to cover that.

00:32:30.280 | I recognize that the need for insurance often doesn't go away like in my mind it should.

00:32:35.280 | Then also, people don't like giving it up. When people haven't owned life insurance,

00:32:41.240 | they don't actually know the feeling of security and confidence that comes with having life

00:32:45.240 | insurance.

00:32:46.480 | Once they own it for a while, usually something will happen. They'll have a close call on

00:32:50.560 | the highway or a friend of theirs will have a heart attack or something like that. Then

00:32:55.000 | all of a sudden they say, "I'm really glad to know that if something happened to

00:32:59.320 | me, I've taken care of my family."

00:33:02.600 | Once they get into that perspective, then they often look at their situation and say,

00:33:07.480 | "I don't want to lose this." One of the big things that I have had to work through

00:33:13.000 | is a lot of clients who might be in their 50s and their 10-year term life insurance

00:33:17.440 | policy is going away and they don't want to lose their insurance coverage.

00:33:22.400 | Then you're out shopping the market as a 50-year-old and saying, "What can I do

00:33:25.680 | and how can I figure out how to keep life insurance in force?" Maybe in the meantime

00:33:29.600 | they've had some health scares.

00:33:30.600 | You're watching that commercial with Alex Trebek.

00:33:32.640 | Right, right.

00:33:33.640 | Like, "Hey, that sounds like a good idea."

00:33:40.320 | I have come to prize in financial planning a concept that I almost never hear people

00:33:45.540 | talk about. That's the concept of flexibility. When I build an insurance plan, I want to

00:33:51.840 | make sure that no matter what happens, that it's going to work over the long term.

00:33:58.520 | In general, you always solve death benefit needs with term life insurance because term

00:34:04.240 | insurance is going to be your cheapest way to buy death benefit. That's always going

00:34:09.880 | to be the case. Term insurance is going to be your cheapest way to buy death benefit

00:34:13.800 | in the beginning.

00:34:14.800 | But you have to recognize the fact that your insurance is going to expire. Term life insurance

00:34:19.640 | is temporary. It's going to expire. If you have a short-term need and you need death

00:34:24.880 | benefit, you always start with term life insurance. But you want to leave yourself some options

00:34:29.040 | as your financial life develops.

00:34:31.360 | It might be the fact, it might be the case that 10 or 15 years from now, you're effectively

00:34:35.960 | self-insured. You've paid off your debt. You've saved a million dollars. You don't

00:34:38.760 | need life insurance anymore. At that point in time, you go ahead and drop it.

00:34:42.800 | But it might be the case that something else has happened. You've started a new business.

00:34:47.120 | I've been in this situation where I invest heavily into investments that are non-liquid.

00:34:52.000 | You've bought houses. You've bought rental properties. And all of a sudden now, if you

00:34:55.600 | die, you don't have liquid assets that are sufficient to cover your family.

00:34:59.880 | So you need to make sure that your term life insurance program in and of itself is flexible.

00:35:04.080 | And then you need to make sure that you have options to change it from term life insurance

00:35:08.200 | to permanent life insurance as you need to.

00:35:10.680 | Yeah. And I think that's a great point, too. So let's talk about that a little bit, too.

00:35:15.280 | What do you say to somebody who's listening to this and thinks, Josh is brilliant and

00:35:19.880 | I love the idea of the combination and the flexibility of insurance? What do you say

00:35:25.240 | to someone who doesn't have the budget to do? You know, and we know this working with

00:35:31.520 | younger people and being in our 30s is how do you manage having that coverage, that insurance

00:35:38.640 | coverage and you want your cake and eat it, too. What should you do to try to fit it into

00:35:44.720 | your budget?

00:35:45.720 | I've got on my show, I hope this whole thing doesn't sound like an ad for radical personal

00:35:50.120 | finance, but I've got probably at this point 12 to 18 hours of content on life insurance.

00:35:56.880 | So I'm going to give the short answers. But if people really want to dig deep, there is

00:36:00.200 | some content available on life insurance. I've got, I think I did a three hour show

00:36:04.920 | on term life insurance. And I don't often like to talk about academic backgrounds, but

00:36:09.680 | in this case I'll go ahead and do it. There's a design, I do have an academic background

00:36:14.360 | in the insurance industry and that's one of the things that does make a difference when

00:36:17.840 | you study the academics of it. So for example, I have a certificate called the Chartered

00:36:22.320 | Life Underwriter, which is in many ways equivalent to a master's degree exclusive to life insurance.

00:36:27.240 | If you can work with an insurance advisor who has after their name CLU, that means something

00:36:32.080 | and you should consider that person a little bit more knowledgeable than the guy next door

00:36:36.040 | on the street. But the answer is cost is not a constraint if you do the program right.

00:36:40.880 | So I'm 30 years old and I have two young kids and I'm married and I am the sole income

00:36:46.440 | earner in my household. I have just under two and a half million dollars of term life

00:36:50.960 | insurance, I think it's like 2.3 million dollars of term life insurance. And my monthly

00:36:56.360 | premiums for that are something like 85 bucks a month. So it's not generally cost prohibitive

00:37:02.320 | to have term life insurance if you adjust it right. For younger people, I do not like

00:37:07.960 | level term life insurance. The standard advice you hear is buy 10 or 15 or 20 year level

00:37:13.280 | term life insurance. I don't like that and there are a few reasons why. In short, level

00:37:18.200 | term life insurance is a product that will force you out at a predetermined date, 10,

00:37:24.040 | 15 or 20 years from now. The cheapest prices will always come in the shortest periods of

00:37:29.080 | terms. So 10 year term insurance will always be the cheapest. But the problem is it's inflexible

00:37:34.560 | and you're forced out of the policy after 10 or 15 or 20 years.

00:37:38.280 | There's another type of policy design which used to be far more popular. This is called

00:37:42.280 | annual renewable term life insurance or another name for it which is the same as yearly renewable

00:37:47.840 | term. This is not as popular today because it's hard to explain how it works to people.

00:37:53.440 | So it's not easily packaged into a 30 second TV commercial. But if you talk to an insurance

00:37:57.960 | agent, ask them about an annual renewable term policy. That's what I own is all of

00:38:03.240 | my insurance is annual renewable term insurance. The way these policies work is they are pure

00:38:08.720 | term life insurance. There's no cash value accumulation. There's no savings programs

00:38:15.960 | to it. It's just pure term life insurance. But the way that insurance policies work internally

00:38:21.120 | is that every year the actual cost, the premium increases each year of your insurance because

00:38:26.280 | you're one year closer to your likely death. So the way these policies work is they charge

00:38:31.980 | you whatever the actual premium is at the current age for your situation. So I pay every

00:38:39.360 | year what the actual cost of insurance is for a 30 year old male. I don't pay for

00:38:46.280 | what a 40 year old male is. I pay for a 30 year old male. In the beginning of life, this

00:38:49.680 | is the best plan for younger people, people in their 20s, 30s and 40s. When you get to

00:38:54.680 | about your mid 40s, that's when you need to change. At that point in time, you want

00:38:58.200 | to start looking at level term insurance products instead because the premium rates start to

00:39:02.440 | increase substantially on annual renewable term once you get into the 40s and 50s and

00:39:07.120 | 60s and they're unaffordable at that point in time. So that's where your level term

00:39:10.700 | policies are the best bet. The reason however why, so my term insurance

00:39:16.200 | policies and my wife's policies are all a, it's a Northwestern Mutual product because

00:39:21.720 | that's where I came from. It's a product called Term Insurance to Age 80. So the way

00:39:25.200 | it works is I can keep my insurance policies as long as I want up through the age of 80.

00:39:30.160 | So that gives me another 50 years of coverage but I pay the exact price that a 30 year old

00:39:36.760 | should pay. So it's very cheap now and they're convertible anytime between now and age 60

00:39:43.400 | without taking any medical exams. So my plan is to build a lot of wealth and build a lot

00:39:48.200 | of assets. I have some small whole life policies at this point in time but I expect to probably

00:39:53.880 | desire to have more whole life policies in the future. So if I sit down at age 40 and

00:39:58.400 | I got a couple million bucks and I decide I want to go ahead and purchase some more

00:40:01.560 | whole life policies, I don't have to take more medical exams. I can just swap out my

00:40:05.240 | term life insurance for whole life insurance. So that is my recommendation for younger people

00:40:12.500 | to what my family is doing and it's my recommendation for others to pursue. It's very hard however

00:40:17.640 | to find an insurance agent who's going to be aware of annual renewable term or yearly

00:40:21.360 | renewable term. More and more companies are pulling their products but if you ask your

00:40:25.360 | insurance agent, there are companies out there especially included in the brokerage world

00:40:30.200 | who offer that type of product.

00:40:33.240 | We are going to take a quick break in the show right now and if you are thinking about

00:40:36.960 | looking into life insurance, please check out this podcast episode sponsor, TermLifeInsurance.com.

00:40:42.480 | Where you can analyze your needs and find the best coverage for your family all in one

00:40:47.440 | place. Check them out at www.termlifeinsurance.com.

00:40:56.360 | I think you bring up a great point too Josh. It's hard to find. A lot of insurance out

00:41:01.880 | there is products and is for lack of a better word, cookie cutter. So clients fill out a

00:41:08.560 | drop down box and then they fit in a very specific thing and especially for the term

00:41:14.300 | product, there are insurance companies don't like to invest a lot of time and energy and

00:41:19.400 | resources in the term product. That's just their, you know, they want that to be the

00:41:23.440 | quickest easiest sell. They don't want to invest a lot of time and you bring up the

00:41:27.160 | point that it could be a little bit, clients can have the ability to make it a little bit

00:41:32.320 | more complex and work a little bit more in their favor and it's going to take extra time

00:41:37.200 | on their part, on the client's part to ask and figure it out and see if they're working

00:41:43.680 | with a company that can provide them what they want.

00:41:46.240 | There's no reason not to work with an insurance expert. One of the things that is frustrating

00:41:52.200 | to me in some ways is the fact that all insurance, there is no, I am not aware, I actually got

00:41:57.960 | an email from a reader saying it was two companies that he thinks that they did so I need to

00:42:01.560 | check this out. I don't know the names of any companies off the top of my head that

00:42:06.880 | will sell insurance that's not commission based. All insurance products are commission

00:42:11.280 | based and the question is who's keeping the commission? So let's say for example when

00:42:16.040 | I was an insurance agent with Northwestern Mutual, I had access to Northwestern Mutual's

00:42:20.000 | products and then I could also sell insurance with any company that brokered their insurance

00:42:24.960 | which is most companies out there. So I could sell a Northwestern Mutual policy or a MetLife

00:42:29.960 | insurance policy or Prudential policy or a Banner policy or whatever and I would be paid

00:42:34.160 | a commission on any of those sales. That commission is exactly the same as the owner of what TermInsurance.com

00:42:42.280 | or SelectQuote or AccuQuote or any of these companies that advertise on TV, Xander Insurance

00:42:46.640 | for the Dave Ramsey crowd. All of those companies collect the exact same commission on their

00:42:51.700 | products as I would collect on the sale of it.

00:42:54.920 | And so when you're thinking about the purchase of insurance, you have to say, "Well, what

00:42:59.840 | am I trying to get? What's the service that I'm trying to get?" If you work with a local

00:43:04.720 | insurance agent, if you can find somebody who's competent and who's trustworthy, even

00:43:09.600 | on a term life insurance sale, that can be worth it as far as from their perspective

00:43:16.440 | from a commission standpoint. If I were a commission rate on brokered insurance products

00:43:21.600 | like a Banner Life or Prudential or MetLife, those would range from 75 to 100% of the first

00:43:27.000 | year premium. And so as long as you're not trying to buy an $82,000 policy, in which

00:43:31.400 | case it's really not worth it. There's not enough incentive there for an insurance agent

00:43:35.680 | to work with you.

00:43:36.680 | But if you're working with a family and you're going to buy a million and your wife's going

00:43:39.840 | to buy a million or your husband's going to buy a million, you're going to wind up with

00:43:42.640 | premiums that are 100, 200 bucks a month. There's an 800 to $1,200 payday there for

00:43:48.520 | an insurance agent. And so it's worth it for an insurance agent, even on term life insurance

00:43:53.920 | products, to sit down and work with you and say, "Let me walk you through. Let's figure

00:43:58.480 | out how much insurance you actually should have and you'll get some more personalized

00:44:04.040 | advice." I think that's really valuable because all you're going to get online is a calculator

00:44:09.400 | and you're going to get a multiple of income approach or something like that. But yet you're

00:44:14.160 | going to pay exactly the cost for that versus the product from your local insurance agent.

00:44:19.280 | So why not work with someone who can actually review your situation?

00:44:22.160 | Yeah, I think that's a great point. And to also talk about fees and things like that,

00:44:28.400 | these are not fees that come out of the client's pocket. This is how they're compensated internally,

00:44:36.320 | the insurance agent. So you shouldn't have to worry about you, the insured, as paying

00:44:42.200 | the fees out of pocket. It comes out of the sale of the plan. It's an internal fee from

00:44:48.880 | the insurance provider. So like I always say, you get what you pay for. You get what you

00:44:56.200 | pay for in a lot of things in life and you can get what you pay for in insurance as well.

00:45:01.920 | And if you do want that extra attention, some people, the online, the dropdown, whatever,

00:45:09.880 | that's fine. That works for them and that's great. But if you want that extra attention

00:45:15.800 | and extra handholding, it's out there. There are people out there and you can get it and

00:45:20.040 | not necessarily have to pay for it. But you do have to make sure that you understand what

00:45:26.120 | you're getting and that you're not getting more than what you need to and you are working

00:45:31.540 | with someone you trust.

00:45:32.540 | I think the reason people don't want to work with individuals is because they're concerned

00:45:37.140 | about sales pressure. And many life insurance agents over the years have used high pressure

00:45:42.280 | sales tactics and this makes people feel very uncomfortable. And so they're concerned that

00:45:47.200 | if Joshua Sheets shows up in my house and he's sitting at my kitchen table, he's going

00:45:50.160 | to pull out the hammer. He's going to say, "Sign here." And all of a sudden I'm going

00:45:54.040 | to wind up buying something I didn't expect to buy. That's a reasonable, rational fear.

00:45:59.360 | I have the same fear in other areas of my life and reasons why I don't want to work

00:46:02.800 | with a salesperson. I think that the best move is get educated so that you can ask good

00:46:09.560 | questions and then try to work with an agent who knows what they're talking about and even

00:46:16.000 | get a second opinion. It is a risk because many agents will use a high pressure sales

00:46:22.720 | tactic on you. But if you're educated, you can smell it out.

00:46:26.800 | And again, I've done my best. I know Shannon's doing her best. We're doing our best and today

00:46:31.040 | it's better in 2015 than it was in 2013 for transparent sources of information to know.

00:46:38.080 | Like I said, most people don't have a clue how much commissions are on insurance policies.

00:46:42.480 | I've just told you normal rates, normal ranges so you can have an idea. I always wish in

00:46:47.120 | the years of it as an agent, I always wish people would ask me, "How much money do you

00:46:51.120 | make and how do you get paid?" People don't ask. And I think that ought to be clearly

00:46:55.140 | available and clearly available information. Don't be scared to ask hard questions. It's

00:46:59.080 | your money. You've got to take care of it.

00:47:00.560 | Well, they think it's – those are questions you think you ask a financial advisor or financial

00:47:04.400 | planner and I think they're not necessarily common questions people think about in insurance

00:47:08.280 | sales. And like you said, there's money being paid out and people should understand

00:47:13.080 | where it is. But how do you advise somebody though – I mean they're doing their research,

00:47:19.880 | maybe they've asked around, nobody's got a good insurance person for them to work with.

00:47:26.080 | How do they go about finding somebody?

00:47:28.400 | Another difficult question. So I've struggled with how to answer this question. I'll give

00:47:34.960 | you my answer. Feel free to disagree. But I've struggled with how to answer this question

00:47:39.120 | because having been in the industry, I have a soft spot, some biases having been in the

00:47:45.440 | industry. But now that I'm external to the industry, I can see the problems and see those

00:47:51.440 | – see the problems. Here's my best guess. I think there's a lot of value. Personally,

00:47:57.160 | I am biased but I think there's a lot of value in working with somebody who is at least

00:48:03.000 | if you don't know anybody already. Let's say that you're working with your Merrill

00:48:06.480 | Lynch lady and she's going to say, "OK. Here, let me refer you over to my insurance

00:48:11.640 | rep." OK. That's fine because then they can service it within the office. But if you

00:48:15.400 | don't have an existing relationship, I would probably prefer to work with a mutual insurance

00:48:20.800 | company instead of a stock insurance company. There are three big ones who are – there

00:48:25.760 | are others that still exist but there are three really big ones that are the market

00:48:29.960 | leaders and those three are New York Life, Northwestern Mutual and Mass Mutual. I would

00:48:35.240 | check to see if any of those three companies have an office near you. Then what I would

00:48:39.760 | do is I would call that local office. I would ask to speak to the managing director. That's

00:48:45.280 | usually the term that will be placed on it or it could be the supervising director. The

00:48:49.400 | person who is in charge of that office used to be called the district agent. But now – and

00:48:55.000 | that's actually still what it's called in insurance contracts but that name has been

00:48:57.800 | changed on the public marketing side. I would say, "Here's my situation. I'm trying

00:49:03.200 | to find a rep, trying to find an agent. Which of your agents would you refer me to?" That

00:49:08.080 | person will choose one of their agents. I think that's about the best plan that I've

00:49:12.280 | got for you right now because that will allow you to work with a company that has a history

00:49:18.840 | in insurance. Usually, a rep from one of those companies is going to be more well-trained

00:49:23.920 | with life insurance than is say the local car insurance rep. If you actually have some

00:49:28.960 | friends that have taken jobs working as a life insurance rep for say the local car insurance

00:49:34.560 | company and they just have their financial services rep, the production expectation,

00:49:40.240 | the number of policies and things like that of those reps is for those of us who come

00:49:43.920 | from a life insurance background is laughably low. There's really not the incentive or

00:49:48.880 | the desire for many of the agents in that situation to really be experts on life insurance.

00:49:55.280 | At least if you go with one of those companies, they're going to have access to training

00:50:02.200 | and they're probably going to be more knowledgeable. Just because they're with those companies

00:50:05.520 | doesn't necessarily mean that they're exclusively able to sell that company because that's

00:50:09.000 | the fear. The fear is, "Well, if I work with the Mass Mutual guy, then I have to

00:50:13.560 | buy Mass Mutual." Mass Mutual might be the best fit or it might not be. Northwestern

00:50:18.300 | Mutual might be the best fit or they might not be. So ask the rep, "Can you sell me

00:50:22.160 | products with other companies?" I had many clients for whom Northwestern Mutual policies

00:50:27.060 | were the best solution. I also had many clients for whom Banner life insurance policy was

00:50:31.760 | the best solution. If you're working with a rep that has access to both, then they should

00:50:36.120 | be able to help you out and actually give you some better, more personalized advice.

00:50:41.000 | I actually agree with your suggestion on how to find an insurance rep that you can speak

00:50:47.800 | with. I think that the first choice is obviously somebody you know and trust, but if you don't

00:50:53.320 | have that person, the next best is that route. I would say when you do speak to that office

00:50:59.080 | manager, the person in charge, having come from a branch office experience, I think anybody

00:51:05.240 | who's at the top level of an office, they know who their people are and how they work

00:51:11.080 | and operate. You should have a very honest conversation with that office manager or whatever

00:51:17.720 | their call, whatever their title is, and say, "Look, I'm looking for somebody like this.

00:51:22.840 | I don't want a hard sell. I want somebody who's going to answer my questions." Give

00:51:28.280 | them the full detail of who you are and what you want and they will do a really good job

00:51:34.160 | of finding the right fit for you.

00:51:37.120 | Most people who are managers of an office like that, they have a client either, depending

00:51:42.600 | on the company. For example, my understanding, New York Life managing directors don't do

00:51:47.880 | any personal production. They're going to refer out all of theirs. Some Northwestern

00:51:52.000 | mutual managing directors do do some personal production. It varies depending on the company.

00:51:56.160 | I don't remember what MassMutual, FS and my friends, what they do.

00:51:59.880 | Most of the time, when people are at that level, they're not going to be necessarily

00:52:03.880 | 100% focused on building new clients. They're focused on managing other agents. Some of

00:52:09.880 | them might say, "I'll help you myself," in which case, go for it. It's probably fine.

00:52:14.000 | Or they'll go ahead and say, "We'll just go ahead and call. Here's the person who's

00:52:16.480 | going to be the best fit," and they'll help.

00:52:19.400 | Don't be scared to call multiple offices. Just because the company name is a name that's

00:52:23.320 | respected and admired doesn't mean that the office is run by somebody that you want to

00:52:26.560 | work with. I had a great experience at Northwestern Mutual, but I've met people who said, "I

00:52:31.480 | had the worst experience in the world." Having been outside the industry, there are some

00:52:36.800 | offices that I would never work with. Just like with anything, you've got to look around.

00:52:51.160 | The name helps. It's a good start, but you've still got to figure out who's actually going

00:52:55.720 | to work with you.

00:52:56.720 | Lapera: Yeah, definitely invest the time and you'll get what you pay for as far as what

00:53:02.600 | you invest in.

00:53:03.600 | Kline: I have some thoughts for you. Earlier, I sidestepped the question of whole life insurance

00:53:07.680 | as an investment. I have some thoughts on that topic.

00:53:09.920 | Lapera: I actually wanted to go back there. We kind of talked about it a little bit. But

00:53:15.680 | yes, I did want to go back to that point of whole life as an investment option. This will

00:53:22.480 | come up a lot. Again, it kind of goes back to the industry. If somebody is meeting with

00:53:29.320 | a person who works for an insurance company, a financial planner who works for an insurance

00:53:32.440 | company, many times you will get a pitch, a sales pitch. You might get a great financial

00:53:40.640 | planner who will give you a very holistic approach, but I know personally I've had a

00:53:44.520 | number of clients get a very strong pitch on the value and benefit of life insurance

00:53:49.520 | as an investment. My clients call me and they're like, "I don't know. Maybe it sounds like

00:53:54.880 | a good idea. I don't really know what I was just told, and it's hard for them to decipher

00:54:02.840 | it." What is your view on whole life as an investment solution?

00:54:06.960 | Kline: I've got some strong thoughts on this. I'll do my best to lay them out in a way that

00:54:11.320 | people can understand it. I have a little dream. One of my dreams is that in the future

00:54:18.200 | you won't have to distinguish between, "Well, my financial planner is a financial planner

00:54:24.320 | from an insurance company," or not. Today, it is much more likely that a financial planner

00:54:29.600 | who works in an insurance company is more likely to suggest a whole life insurance policy

00:54:34.680 | than someone who doesn't. I'm not sure how much of that. I think some of that is just

00:54:38.720 | due to experience, bias, things like that. I think some of it is just due to exposure.

00:54:45.160 | For example, if I hadn't ever worked with some of those older clients who told me, I

00:54:50.760 | would look back on their history of investing in stocks. So many people who've done everything

00:54:55.440 | that Money Magazine said to do, they've wound up losing money in stocks. I think more people

00:55:00.600 | lose more money in their 401(k)s than they make. There are a lot of reasons for that.

00:55:05.160 | I think when you actually look at actual returns, what we as financial planners tell people

00:55:10.320 | to do doesn't work many times because they don't do it. It's not that there's anything

00:55:15.280 | wrong with the advice, it's wrong with how we articulate it, which is a whole challenging

00:55:18.880 | question of how do we as advisors do a better job for clients. But insurance has a lot of

00:55:24.680 | strengths and a lot of weaknesses. The first thing I would recommend to people is to pull

00:55:30.480 | away the idea of belief. Earlier I joked about it kind of being a religion. I believe in

00:55:37.680 | life insurance or I don't believe in life insurance. To this day, many financial planners

00:55:43.480 | would make statements like that. Well, I don't believe in whole life insurance. One of the

00:55:47.680 | things I learned and I had to go through some very painful tearing as an advisor was not

00:55:52.720 | to say that, but rather to say what are the attributes of any product or any choice or

00:55:58.560 | any decision. Let's pull it out of life insurance for example and say what about investing in

00:56:05.760 | real estate. Somebody says, "Well, I don't believe in investing in real estate," or

00:56:09.760 | "I believe in investing in real estate." People who make those statements are probably

00:56:13.960 | not real experts in the industry. They're probably not expert real estate investors.

00:56:18.720 | The only purpose of any investment is to create cash for you and that cash is going to have

00:56:24.800 | certain attributes, sometimes going to be cash now and sometimes going to be cash later.

00:56:28.840 | But we're using that investment to fund our lifestyle and to fund our goals. So we can

00:56:33.200 | look at any financial opportunity and every financial opportunity will have strengths,

00:56:39.160 | it'll have weaknesses, and it'll have a place where it fits. Savings accounts have

00:56:44.240 | a place where they fit. I keep cash and $20 bills at home. I don't keep all my money

00:56:50.080 | in a savings account. There are reasons for that. There are risks to it. Same thing with

00:56:54.200 | insurance policies. Insurance policies have benefits and have advantages and disadvantages

00:56:59.360 | as do stocks. But even if you say something like stocks, that still doesn't tell you

00:57:02.440 | anything about the trading strategy. So every approach has benefits, has advantages and

00:57:07.560 | disadvantages. You can only ever make a good decision when you actually know what your

00:57:11.120 | goals are and then you can look and say, "Ah, here's the right move." And I like to use

00:57:15.040 | a couple of simple analogies for people. My favorite is the question of cars. If you go

00:57:21.760 | to a car dealership and you say, "Well, I'm looking at," and you're looking at two cars.

00:57:27.520 | One car is a Honda Civic and the other is a big Ford F350 Dually. How do you choose

00:57:33.000 | between those two different vehicles? You only choose between them based upon what your

00:57:39.400 | goals are. If you walk into the car dealership and you tell the person, "I'd like to tow

00:57:44.680 | the horse trailer around as I travel across the country and show my horses off," and they

00:57:49.400 | start talking to you about the fact that the Honda Civic gets great gas mileage, you know

00:57:53.200 | you're in the wrong situation. On the same hand, if you say, "I need a commuting car,"

00:57:57.360 | and they start talking to you about the F350, you're in the wrong situation. And so most

00:58:01.820 | of the time what happens in bad relationships, financial planning relationships gone bad,

00:58:06.880 | is the advisor or the salesperson hasn't effectively articulated the goals and then effectively

00:58:13.720 | clarified the attributes of a certain type of product. And they're not connected. That's

00:58:20.120 | usually where it goes bad. Not based necessarily on the actual attributes of the product, but

00:58:25.160 | actually where they're connected. Once you start with the basis of, and this is where

00:58:28.920 | I'm going to switch to a different metaphor. Once you know what I want to do, for example,

00:58:32.320 | I want to dig a hole, or I want to move some things, so I need a shovel. Well, there are

00:58:37.400 | literally dozens of different types of shovels that you could buy. You could get a snow shovel,

00:58:41.720 | you could get a flat shovel, you could get a rounded shovel, you can get a garden spade.

00:58:47.280 | There are tons of different designs of shovels. Some variations of design are very large.

00:58:52.700 | For example, a snow shovel versus a simple round garden spade. Big difference between

00:58:57.560 | those. You wouldn't try to dig a hole with a snow shovel, and you'd be dumb to try to

00:59:00.800 | move snow with a garden spade. But then you can even fine tune it a little bit more, and

00:59:04.800 | you can talk about slight differences of different lengths of shovels and different applications

00:59:08.960 | for them. So the same thing with insurance. I like to explain that to say, let's walk

00:59:14.000 | away from the emotion of a philosophy and talk about the actual attributes of the product.

00:59:20.920 | Fundamentally an insurance policy can represent a couple of different things, but it represents

00:59:24.800 | an insurance product with certain built-in attributes. Some of those attributes are the

00:59:30.160 | tax code, some of the attributes are the investments that are within the policy, some of the attributes

00:59:34.480 | are actually how the internal mechanics of the policy work. So where people often go

00:59:39.760 | wrong with, the first place that they often go wrong when comparing insurance policies

00:59:44.400 | as an investment, is they make a poor comparison of what is their alternative. If you are trying

00:59:50.640 | to compare a traditional, whole life insurance policy, I'll be specific here, a traditional

00:59:58.240 | ordinary life insurance policy with an old conservative mutual insurance company, a Mass

01:00:03.800 | Mutual, a New York Life, a Northwestern Mutual, if you're trying to compare that with stocks,

01:00:09.280 | you're making a poor comparison. Because from the perspective of the investments that are

01:00:14.520 | driving that, it's like the F-350 and the Honda Civic. Fundamentally, a traditional

01:00:20.160 | ordinary, what's called a portfolio-based life insurance policy, is going to be funded

01:00:25.020 | based upon what in industry lingo is called the general account of the insurance company.

01:00:30.520 | The general account is their portfolio of investments that they run, which they're using

01:00:37.640 | as reserves to pay out their policy obligations. By law, that investment portfolio is going

01:00:44.280 | to be extremely conservative in nature. Usually, greater than 80% of that investment portfolio

01:00:51.880 | is going to be invested in fixed income investments. Depending on the insurance company, depending

01:00:57.160 | on the cycle, they may have a portion of it which is invested in public securities, they

01:01:01.880 | may have a portion that's invested in private placements, they may have a large portion

01:01:05.600 | invested in real estate, each insurance company advantages differently. But it's a very conservative

01:01:10.000 | portfolio. So, if you're going to go back historically and say, "How do the returns

01:01:13.420 | over a 20 or 30 year period of my whole life insurance policy compare to the returns of

01:01:18.840 | my S&P 500 index fund?" In a normal market scenario, the S&P 500 index fund is always

01:01:26.880 | going to have a higher ending value than the whole life insurance policy. That's generally

01:01:32.880 | going to be true because the market is going to be delivering a higher return to pay you

01:01:37.680 | for the volatility that you have to suffer. So, I would never compare a life insurance

01:01:42.040 | policy directly against stocks, unless I'm just simply saying, "Well, here are some

01:01:45.000 | different choices." I would compare a life insurance policy against other types of investments

01:01:50.360 | that are very, very stable. So, I would compare it against putting together a portfolio of

01:01:54.960 | CDs. I would compare it against putting together a portfolio, perhaps, of corporate bonds,

01:02:00.560 | depending on the structure. That's what I would compare it against. If you compare a

01:02:04.520 | well-designed life insurance policy against those types of investments, life insurance

01:02:09.120 | has a lot more going for it. It's a much more compelling case.

01:02:12.400 | There are also some disadvantages to life insurance policies. For example, you've got

01:02:16.360 | to be aware of the tax ramifications of life insurance. One of the disadvantages of life

01:02:20.640 | insurance is you cannot put it into a qualified account. You can't put it into an IRA. You

01:02:25.080 | can't put it into a 401(k). It has to exist as a separate external product. And so, the

01:02:31.080 | disadvantage with life insurance is that if you own a policy, you own it for 30 years

01:02:36.320 | and you cash it out, then you're going to pay tax on that money at ordinary income rates.

01:02:43.080 | If I'm going to compare that, and no matter what the growth is, it's going to be paid

01:02:46.960 | at ordinary income rates. If I'm going to compare that to possibly the tax advantages

01:02:51.540 | of using a Roth IRA, where I can have growth after 30 years that doesn't pay any income

01:02:56.000 | taxes, or if I can compare that to a portfolio where, for example, I'm holding stocks on

01:03:02.760 | a long period of time where I can pay taxes at long-term capital gains rates, that's

01:03:08.360 | a demerit against the life insurance policy. But then you can move into some specifics

01:03:12.680 | of, for example, the ability to borrow money out against the policy without surrendering

01:03:18.160 | it. Now, all of a sudden, that money can come out without incurring current income taxes

01:03:22.360 | as long as the policy stays in force. Now, I've got an advantage of life insurance.

01:03:26.680 | So where I think life insurance works really, really well, whole life insurance policies

01:03:30.720 | work really, really well, is they work very well for longer-term, safer dollars. When

01:03:37.720 | I was trying to figure out how to articulate it, I was studying just some sales training

01:03:41.360 | of some life insurance agents, and that was a phrase that really made sense to me. Longer-term,

01:03:46.880 | safer dollars. So I view my life insurance policies as part of my emergency funds, part

01:03:52.480 | of my backups. I don't view them as a core component of my ability to really grow wealth.

01:03:57.920 | They're part of my emergency funds. I actually like to keep a bulk of my emergency fund in

01:04:03.080 | a life insurance policy if possible, because this is money that is very, very safe. It's

01:04:09.040 | guaranteed by the insurance company to always increase in value. The rate at which it will

01:04:14.200 | vary from time to time. But in the case of an emergency, let's say I have a short-term

01:04:20.120 | car repair bill or something like that, with most life insurance companies, you can have

01:04:24.760 | the money within 24 to 48 hours. Now, that's not always the case. By law, they have up

01:04:30.200 | to six months to send you the money. But as a matter of practice, most insurance companies

01:04:35.760 | will be able to get you a check in 24 to 48 hours. So when I look at something like an

01:04:41.720 | emergency fund situation, for me personally, and I look at the fact of, okay, if I'm going

01:04:45.960 | to pretend I'm going to keep six or 12 months of living expenses on hand as cash, well,

01:04:50.840 | a certain amount of those living expenses needs to be readily available in case a hurricane

01:04:55.200 | blows through. So maybe I'm going to keep a month or two worth of living expenses in

01:04:59.520 | $20 and $100 bills in my gun safe, something like that. Then a certain amount of it needs

01:05:05.420 | to be readily available in, say, a savings account or a money market fund that's linked

01:05:11.960 | directly to my checking account. But I don't need a year's worth of cash sitting in a savings

01:05:16.080 | account. But I can go ahead and keep some of that cash in the context of a life insurance

01:05:21.240 | policy. Then if I need it out, I can go ahead and get it out in 24 to 48 hours. With that,

01:05:27.760 | that should get me through a lot of the things that would bankrupt other people. But then

01:05:31.040 | I've taken what I've done there is I've effectively taken money that's sitting in a savings account

01:05:35.840 | earning what, 0.0 nothing, and I've moved it into an environment where it's not earning

01:05:42.640 | 10%, but maybe 4 or 5%. Who knows how long this low interest rate environment is going

01:05:48.680 | to continue. Life insurance dividend rates are on the decline right now because of the

01:05:52.720 | fixed income interest rates. But I'm earning more than I'm earning in a savings account.

01:05:58.200 | When you also start to compound that with other benefits and you look at the tax-free

01:06:03.840 | transfer at death, there are some advanced techniques, estate tax planning techniques

01:06:10.340 | we can get into, and not even estate tax planning, just some advanced tax planning techniques

01:06:14.640 | even for people who aren't subject to the estate tax, which is most of us are not at

01:06:17.680 | this point. Now we've got an over $10 million exemption amount for everybody. It becomes

01:06:23.800 | a more flexible approach. In Florida, money that's in a life insurance policy is exempt

01:06:29.320 | from the claims of creditors. It's also a non-probate asset. So it passes by contract

01:06:36.240 | law not based on probate law. I can own the policy in a variety of flexible ways. So as

01:06:42.320 | a tool within my financial planning arsenal, it's useful. But it's not because it's a catch-all

01:06:48.800 | be-all. It's just simply useful. That's my opinion. Unfortunately, none of that stuff

01:06:54.000 | ever comes into a 30-minute sales presentation for most people.

01:06:57.000 | No. I was going to say that's the first I've ever heard this.

01:07:02.000 | Well, this is my frustration with the financial planning industry.

01:07:05.260 | I've sat through a lot of those.

01:07:07.220 | Not only am I against a lot of the sales of life insurance policies, I'm against a lot

01:07:11.060 | of the sales of mutual funds and Roth IRAs. The reason is because structurally speaking,

01:07:18.400 | our financial advisory industry is structured to sell financial products rather than structured

01:07:25.520 | to help clients reach financial goals. What I would love to see is a transition from us

01:07:30.460 | as financial advisors away from being paid upon the sale of financial products towards

01:07:35.480 | clients paying us directly for advice. Unfortunately, that's very uncommon. Most people don't pay

01:07:41.700 | for advice. They don't pay for coaching. But if they did, I'd not only sell less life insurance,

01:07:46.480 | I'd sell fewer IRAs and I'd probably start a lot more businesses. I'd help people transition

01:07:51.260 | a lot more careers. There are a lot more things.

01:07:53.840 | So that's why, I mean, there's a reason why I have 12 hours of content on life insurance.

01:07:59.680 | I haven't even gotten to universal life insurance, which is going to require its own 12 hours.

01:08:03.440 | I haven't even gotten into variable products. I just have term life insurance and whole

01:08:06.800 | life insurance because this is always the challenge. As a tool, there's nothing wrong

01:08:11.900 | with the tool, but poorly applied or misapplied, it can be a disaster or it can be really,

01:08:17.880 | really great.

01:08:18.880 | You're right. Well, first of all, I've never heard it, life insurance, whole life insurance

01:08:26.600 | as an investment discussed in the manner that you just did. I've heard a lot of whole life

01:08:32.320 | pitches having been a financial advisor. But you bring up the great point of everything.

01:08:38.880 | This is why I left a large wealth management firm to start my own company because no matter

01:08:43.440 | what they tell you, there is always going to be a bias. And it is very difficult to

01:08:49.600 | sift through that as an individual working within a large organization. But that's why

01:08:55.360 | people listen to podcasts and read blogs and try to find the best information out there

01:09:00.680 | to help them navigate. And I agree with you. I think there is a place for whole life and

01:09:06.800 | it's just as an investment, even it's just a matter of understanding where and how it

01:09:12.640 | fits in your total mix of your life goals.

01:09:16.200 | Two of the pieces of data that when I was trying to first get my hands around it, that

01:09:21.040 | really convinced me that I didn't know what I was talking about when I just said,

01:09:25.520 | "Well, whole life insurance is a bad investment. Don't you know that?" is number one, when

01:09:30.880 | I learned about the concept of what's called bank-owned life insurance. And there are two

01:09:37.440 | in the industry they call these BOLI, which is B-O-L-I, bank-owned life insurance. And

01:09:42.800 | the other one is COLI, which is C-O-L-I, which stands for corporate-owned life insurance.

01:09:47.920 | And one of the things that I didn't understand is that many large banks keep a substantial

01:09:53.000 | amount of assets within the context of life insurance policies. And they can use that,

01:09:59.480 | they can keep that there because it still counts according to the federal guidelines

01:10:05.880 | on banking as part of their capital reserves. And so they're able to take some of their

01:10:11.160 | money and tuck it into a life insurance policy and it can be very, very useful for them and

01:10:15.880 | they can earn a higher rate on it than they can with just simply money sitting in a less

01:10:20.360 | productive financial product.

01:10:23.120 | Large corporations often also will use life insurance for various purposes, including

01:10:27.520 | funding their pension plans for their key employees and for their executives. When I

01:10:33.480 | learned about that, I said, "Wait a second. Maybe my view on this is a little bit too

01:10:37.320 | simplistic." Unfortunately, the average consumer is not going to be able to access

01:10:42.960 | the information that they need in order to make a good situation. Because even though

01:10:46.200 | I just went through that whole long speech on, you know, variety is a whole life insurance,

01:10:51.000 | whole life insurance policy from New York Life or Mass Mutual or Northwestern Mutual

01:10:58.120 | is nothing like a whole life insurance policy from Prudential or from Transamerica. They're

01:11:07.040 | just night and day different focuses because just because you have the life insurance contract,

01:11:12.480 | that doesn't mean that the actual underlying contract is well built. You have to look at

01:11:17.760 | the expenses of the contract. You have to look at the actual company's mortality experience.

01:11:23.520 | You have to look at the dividend rates that they're paying and how those dividends are

01:11:27.280 | structured. It's a very involved situation, which is why most financial advisors and financial

01:11:31.760 | planners who look at it say, "Don't buy whole life insurance. Buy term life insurance

01:11:36.600 | and invest the difference." That's what's so frustrating about it. It's really one of

01:11:41.120 | those things where you need to be an expert in it and you need to be very knowledgeable

01:11:44.960 | in it. Most people aren't going to put in the time or energy needed to develop their

01:11:51.040 | expertise, but those who do, do very well in the insurance industry.

01:11:54.800 | If my listeners want to get more in-depth knowledge, how do they find you?

01:12:01.800 | RadicalPersonalFinance.com if they're on a computer. The best way to listen to Radical

01:12:06.480 | Personal Finance should be in most of the podcast directories or just search your app

01:12:10.200 | store on your phone. Just search Radical Personal Finance. You can go back through and see a

01:12:15.560 | lot of past show titles. I think I've got them properly tagged. I'm behind on all my

01:12:20.840 | tagging and what not on the computer. If you go on the website on RadicalPersonalFinance.com

01:12:26.960 | and search, just check the tag for life insurance or click one of the drop down menus on the

01:12:32.280 | top where how the content is organized and go to life insurance. You'll see a number

01:12:36.400 | of shows that I've put there. They're pretty hardcore. Don't expect them to be short sound

01:12:42.200 | bites. They're the hardcore master's degree level information on insurance. I'm hoping

01:12:48.640 | to simplify this over time and create more consumer friendly products and pieces of content

01:12:54.800 | that will be helpful. But for now, that's the best way to find out more.

01:12:58.120 | Good stuff. I'll have links to all these in my podcast notes on Financially Blonde. I

01:13:03.800 | feel like we could talk about this and clearly you have, but we could talk about this for

01:13:09.160 | hours. Let's wrap it up here and get to some random three questions for you.

01:13:15.880 | I'm ready.

01:13:16.880 | Okay. We've been talking about insurance as an investment and investments in general.

01:13:21.640 | So your first question is, what's the best investment you think you've ever made?

01:13:26.720 | Best investment I've ever made is in my own income and in my own business. Most people

01:13:31.820 | do not want to get rich and they don't want to retire, but they do want to be financially

01:13:36.000 | independent and the primary place that you should focus is on your personal income and

01:13:41.400 | on building your own business because for a variety of reasons, that will give you the

01:13:46.320 | fastest path to that return. And focusing on your own income is the most controllable

01:13:52.120 | option and that is what makes the difference. I've never met anybody who got rich by investing

01:13:57.860 | in their 401k or their IRA or by buying life insurance. I've always met people who were

01:14:02.320 | rich either because they made a high income or because they had a business who built some

01:14:08.100 | additional wealth by investing in their 401k or in a life insurance contract. But you've

01:14:15.120 | got to focus first on building a massive income. Your goal should be 10 years from now to increase

01:14:20.120 | your income by a factor of 10 and that's very, very doable or to build your own business

01:14:25.240 | if you are entrepreneurially minded.

01:14:26.960 | I'm with you. I said to people when I started my own company, I'm like, "That's where I'm

01:14:31.400 | investing my capital because I think I'm the best bet out there."

01:14:35.040 | Yeah, absolutely.

01:14:36.040 | So I'd invest in me all day long. Good stuff. Okay, question number two. If you could only

01:14:42.340 | have one book with you on a deserted island, what book would it be and why?

01:14:48.140 | I'll have to tilt this in the context of a finance book.

01:14:55.500 | Oh, no. I want to hear.

01:14:58.660 | The problem is I hate the answer. Christians are the worst and I'm a Christian because

01:15:03.260 | the answer to that question is a Bible and that sounds really, really horrifyingly trite

01:15:09.560 | to many people. The reason is because it's the book that never ends as far as when you

01:15:15.660 | start to see how it works. I mean, there's a reason why I don't know how many millions

01:15:19.640 | of pages have been written about it. So that is the most versatile book that I would go

01:15:23.780 | to but most people when they hear an answer like that, they just say, "Oh, that's ridiculous."

01:15:27.980 | Like, "That's too easy."

01:15:30.980 | If it's a book in general, I would say the Bible, which is a total of 66 books, so you'd

01:15:36.180 | have to narrow it down. And the reason is simply it's a book that never gets old and

01:15:39.940 | that when you talk about the wisdom of the universe, the deeper you go, the deeper it

01:15:46.100 | goes. So I don't know if that's an annoying answer for you. If so, I can give you a finance

01:15:51.540 | book.

01:15:52.540 | No, I personally love that answer and your reason why, but let's just say for people

01:15:57.780 | who found that annoying or tried, what would be your other option?

01:16:04.780 | So let me look at my bookshelf here. I was a part of that also. I was stalling to try

01:16:11.900 | to come up with my answer to the question.

01:16:15.660 | I actually asked you this because I just wanted to give you some more time to stall. I recently

01:16:20.700 | put on my blog, I had just a fun post this week about things about me and I answered

01:16:25.500 | this question myself. And now this will make me seem really vapid, but my answer was Pride

01:16:31.100 | and Prejudice.

01:16:32.100 | It's a beautiful book. I don't think there's anything vapid about Pride and Prejudice.

01:16:37.300 | Cosmo magazine maybe, but Pride and Prejudice is, how does it start? There's a commonly

01:16:44.360 | held belief that any eligible man with an income, I don't know, you could probably quote

01:16:51.100 | it better than I can, must be looking for a wife. It's a beautiful book.

01:16:54.980 | My favorite finance book that I would, I am actually working on a book right now and what

01:17:02.980 | I'm trying to do is to build it to be the actionable book that is to be the book that's

01:17:09.260 | everything that you can do, that you can actually do with money. But in the meantime, I would

01:17:14.860 | say just a great financial book to recommend to people. These questions catch me so flat

01:17:22.420 | footed. A good financial book would be something like Richest Man in Babylon. If you haven't

01:17:26.780 | read a book like Richest Man in Babylon, I'd encourage you to do that. I don't really read

01:17:30.820 | many novels these days. If I do, it's dystopian fiction or techno military thrillers, things

01:17:37.440 | like that. But a good finance book would be Richest Man in Babylon, which might be something

01:17:42.660 | that I would enjoy reading again.

01:17:44.460 | Okay, good stuff.

01:17:45.460 | But if I were on a desert island, I wouldn't, here's what it would be. On a desert island,

01:17:49.460 | I would take the Encyclopedia of Country Living or I would take a book like that that's very,

01:17:55.220 | very practical.

01:17:56.220 | Oh yeah, no, no. We're not going practical.

01:17:57.220 | Turn my desert island into an oasis.

01:17:58.220 | We're not going practical. I know, and I'm Irish, so I mean, I'd be sunburn reading Pride

01:18:05.820 | and Prejudice on the beach. It wouldn't be good, but we're not talking practical. It's

01:18:11.220 | not reality. All right, your last question. When you relax, what do you do?

01:18:17.460 | Relax? What's that?

01:18:18.860 | I know. Married, two kids, business. Yeah, I know it doesn't happen often. So when it

01:18:25.300 | does, what do you do?

01:18:26.820 | I would say if I'm really relaxing, I'll probably watch YouTube videos. That's probably the

01:18:32.660 | go to. I read a lot, and so that is a primary go to is various reading projects. But if

01:18:41.100 | I'm really just need to turn my brain off, I'll watch YouTube videos. I have a soft spot

01:18:45.740 | for overlanding videos, which is a whole subset of four wheel drive people who take their

01:18:52.480 | car and basically drive it around the world where the journey is the goal, not just getting

01:18:57.700 | to the destination. And so I'll go, and my wife and I are watching a wonderful series

01:19:03.060 | that is on YouTube right now called Expeditions Overland. And there's a group of young filmmakers

01:19:09.420 | who've put together their vehicles, and they've done various adventures in the US and then

01:19:13.140 | up to Alaska and then down to Panama. So that's our thing recently as we've been watching

01:19:18.820 | each week as their new episode comes out on YouTube. It definitely would encourage people

01:19:23.220 | that. It's really beautiful. Just look on YouTube called Expedition Overland.

01:19:26.180 | All right, good stuff. Joshua Sheets, Radical Personal Finance, thank you so much for joining

01:19:31.520 | me today and talking about insurance, whole life, term life, investments, all that good

01:19:39.140 | stuff. I really appreciate it.

01:19:41.300 | Thank you, Shannon. I appreciate being here.

01:19:43.460 | Cheers.

01:19:44.460 | I hope you enjoyed my chat with Joshua today. As you can see, insurance can be a very complicated

01:19:51.220 | subject matter, but it's an important one. So I encourage you to invest the time to get

01:19:55.660 | more comfortable with it. If you want to find the notes for this show as well as links to

01:19:59.700 | Josh's site, you can find them on my blog, financially blonde and that's financially-blonde.com.

01:20:05.660 | If you have any comments or topics you'd like for me to discuss, please email me at Shannon

01:20:09.580 | at fin blonde.com and that's Shannon@finblonde.com or tweet to me at blonde_finance.

01:20:17.620 | And finally, I'm continuing to pursue my goal of reaching a hundred five star ratings and

01:20:21.740 | reviews on iTunes and plan to give away 20 free signed copies of my book, Train Your

01:20:27.100 | Way to Financial Fitness to listeners who leave a five star rating and review. So if

01:20:31.500 | you leave one, please send me an email to Shannon@finblonde.com and I will send you

01:20:36.860 | a copy of my book. The first 20 reviewers who leave reviews after this show will receive

01:20:43.300 | a free copy. Five star ratings and reviews help my podcast get out to more listeners

01:20:48.580 | and I love and appreciate my listeners and would love to have even more. And until next

01:20:52.900 | time, take care. Thank you again to our podcast episode partner, termlifeinsurance.com. You

01:20:59.220 | can check them out online at www.termlifeinsurance.com and follow them on Twitter at termlifeblog.

01:21:07.180 | Hey, martinis and your money listeners. I love a drink and a chat with a good friend

01:21:11.380 | as much as the next person. And if you joined in on the fun, I hope that you're at least

01:21:15.540 | 21 or older, you drink responsibly, and if you did drink, please don't drink and drive.

01:21:20.820 | It makes for an all around more fun time. And until next time, cheers.

01:21:25.820 | The Fremont Street Experience in fabulous downtown Las Vegas is home to over 100 amazing

01:21:33.900 | bars and restaurants and the world's ultimate zip line, Slotzilla. Be sure to check the

01:21:38.900 | calendar as Fremont Street Experience hosts Downtown Rocks, a free live concert series

01:21:44.180 | featuring top artists such as the All-American Rejects, Live, Smash Mouth, Gin Blossoms,

01:21:49.380 | Taking Back Sunday, and more. Go to vegasexperience.com to see the lineup and reserve your flight

01:21:55.180 | on Slotzilla, the world's ultimate zip line.